Exam 4: Income Measurement and Accrual Accounting

Lucky Company purchased a truck at a cost of $12,000 in 2009.As of January 1,2014,depreciation of $10,000 had been recorded on this asset.Depreciation expense for 2014 is $2,000.After the adjustments are recorded and posted at December 31,2014,what is the carrying value of the truck?

For each of the following sentences 3-10,select the word or group of words that best completes the statement. The _________________________ of accounting necessitates a number of adjustments at the end of an accounting period.

Motor Repair Shop uses the accrual basis of accounting,and had the following account balances on its financial statements at December 31,2014: On January 1,there was a $0 balance in the salaries payable account.How much cash did Motor Repair pay for salaries during the year?

Closing entries: Commissions Earned 83,000 Income Summary 83,000 To close revenue account.

A cost can be an asset or expense depending on whether the future economic benefits have expired or not.

Measurement of the economic effects on an entity involves each of the following except

Motor Repair Shop uses the accrual basis of accounting,and had the following account balances on its financial statements at December 31,2014: On January 1,the Utilities Payable Account had a zero balance.Motor Repair paid cash for utilities totaling $45,000 during 2014.How much should Motor Repair report as utilities expense as of December 31,2014?

Tracy,Inc. Tracy,Inc.adjusts its books each month but closes its books at the end of the year.The trial balance at July 31 before adjustments is as follows: Refer to the trial balance for Tracy,Inc. Employees are owed $750 for services since the last payday in July,to be paid the first week in August.The amount to be reported in the July income statement for salaries expense is:

Norys Corp.received an 8-month,9% note for $100,000 from its agent on October 1,2014.The note is due on May 30,2015.If Norys' accounting period ends on December 31,2014,how much interest revenue should Norys recognize during 2014 and 2015? 2014 2015

Which of the following accounts is not closed to Income Summary at the end of the accounting period?

Mitchell Company prepares monthly financial statements and will record.a prepaid account for each of the following except:

Electric Company borrowed on a one-year,10%,$150,000 note on May 1,2014 with interest and principal to be paid at maturity.How much interest should Electric Company report on its income statement for the year ending December 31,2015?

The recognition of revenue may result from the settlement of a liability rather than from the acquisition of an asset.

Failure to record the earned portion of unearned revenue would result in which of the following?

Davis Corp.has three employees.Each earns $600 per week for a five day work week ending on Friday.This month the last day of the month falls on a Wednesday.The company should make which of the following adjusting entries?

An entry that includes the Cash account is probably an adjustment.

Esquire Industrial plant operates five days per week with a daily payroll of $4,000.Employees are paid every Saturday for the workweek just completed (Monday through Friday).The last day of the month is Wednesday,March 31.What is the effect of the correct adjustment at March 31?

Tracy,Inc. Tracy,Inc.adjusts its books each month but closes its books at the end of the year.The trial balance at July 31 before adjustments is as follows: Refer to the trial balance of Tracy,Inc. If the equipment had an estimated useful life of five years,what is its book value at July 31,after the proper July adjustment is recorded?

Why does the accrual basis of accounting require adjustments,while the cash basis does not?

An asset is always involved when revenue is recognized.